Sibanye: From gold to platinum-group metals space
Sibanye Gold (SBGL) was primarily a gold producer until 2013 when it spun off from Gold Fields (GFI). Sibanye had already started buying platinum mines when the platinum sector was hit hard by weak prices and labor unrest in South Africa.
In September 2015, Sibanye acquired the Rustenburg mine from Anglo American Platinum. That year, Sibanye also acquired mines from Aquarius Platinum.
During the transaction conference call about Sibanye’s acquisition agreement with Stillwater Mining (SWC), Sibanye’s CEO (chief executive officer) Neal Froneman said, “We’ve now committed over $2.8 billion to the acquisition of Aquarius, Rustenburg and Stillwater, and most of that to date has been done through cash.”
More acquisitions eyed
During its 4Q15 results, Sibanye management said it sees numerous consolidation opportunities in platinum. The company has an ungeared balance sheet, which, along with shareholder support for the platinum transactions, could have encouraged Sibanye to pursue similar acquisitions.
After the acquisitions of the two mines, Sibanye became the number-five player in the PGM (platinum-group metals) space. After that, Froneman said that being number five in the platinum industry was just not enough. He added, “You definitely need to be at least number three to have significant influence. We want a voice at the table otherwise we can’t set and develop our own strategy.”
Siganye’s latest acquisition deal will make it the third-largest producer of platinum and palladium and the fourth-largest producer of PGM metals. Sibanye isn’t planning on sitting tight after the acquisition of Stillwater Mining. Froneman made clear during several interviews after the deal was signed that “there must be more expansion.”
Positive on PGM
Sibanye Gold believes that PGM (PALL) (PPLT) fundamentals remain positive. It flagged substantial industrywide capex (capital expenditure) and production cuts, which should keep the supply in check. Palladium has risen 33.0% this year to $745 per ounce, while platinum has risen about 5.0% to $930 per ounce.